interpret Company A and Company B's results below in terms of the factors that impact Cost Volume Profit Analysis (CVP). Why does Company B have the greater degree of operating leverage? As a manager, why is operating leverage an important concept? Company  A       Company  B   Sales  (10,000 units times $26) $260,000     Sales (10,000 units times $32) $320,000 Less Variable expenses (10,000 units $16)   160,000     Less Variable expenses (10,000 units times $20)   200,000 Contribution margin (a)   100,000     Contribution margin (a)    120,000 Less Fixed expenses     80,000     Less Fixed expenses    100,000 Net operating income (b)     20,000     Net operating income (b)      20,000             Degree of operating leverage (a divided by b)       5.0     Degree of operating leverage (a divided by b)        6.0

Advanced Engineering Mathematics
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ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
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 interpret Company A and Company B's results below in terms of the factors that impact Cost Volume Profit Analysis (CVP). Why does Company B have the greater degree of operating leverage? As a manager, why is operating leverage an important concept?

Company  A       Company  B  
Sales  (10,000 units times $26) $260,000     Sales (10,000 units times $32) $320,000
Less Variable expenses (10,000 units $16)   160,000     Less Variable expenses (10,000 units times $20)   200,000
Contribution margin (a)   100,000     Contribution margin (a)    120,000
Less Fixed expenses     80,000     Less Fixed expenses    100,000
Net operating income (b)     20,000     Net operating income (b)      20,000
           
Degree of operating leverage (a divided by b)       5.0     Degree of operating leverage (a divided by b)        6.0
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